Sanchez Energy will acquire Shell’s 100% working interest in Eagle Ford assets in south Texas for approximately $639m.
The company will acquire Shell’s working interest in around 106,000 net acres in Dimmit, LaSalle, and Webb counties in south Texas, which includes around 176 operated producing wells and associated field facilities and infrastructure.
The assets include 60 million barrels of oil equivalent of proved reserves. Net production from the acreage in the first quarter of 2014 was around 24,000 barrels of oil equivalent per day (boepd), of which around 60% was crude and natural gas liquids.
The acquisition will increase Sanchez’s position in the Eagle Ford to around 226,000 acres, with up to 3,000 potential drilling locations and average first quarter 2014 pro forma production of around 42,800boepd.
Sanchez Energy president and chief executive officer Tony Sanchez III said that the transaction is a catalyst in the company’s strategy to expand through both the drill bit and prudent asset acquisitions.
"The addition of this asset includes at least 200 identified drilling locations and up to 800 additional potential locations that can be added through our planned appraisal work on the rest of the asset and will take us to a total of almost 3,000 potential drilling locations," Sanchez III added.
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By GlobalData"The estimated 200 de-risked ready to drill locations will provide at least four years of drilling inventory at a 50-well-per-year pace. We expect that this drilling activity will generate well-level rates of return in excess of 35% to 50%."
The transaction is expected to be completed in the second quarter. The agreement is part of Shell’s restructuring of its North American shale oil and gas portfolio, to focus on acreage positions that can reach the scale required by the company. It previously divested its acreage position in the Mississippi Lime in Kansas, Utica shale position in Ohio and a portion of acreage in the Sandwash Niobrara basins in Colorado.
